Morgan Stanley Seeks $2 Billion Loan for Japan Hotels

Morgan Stanley is borrowing 225 billion yen ($2 billion) from Citigroup Inc., Shinsei Bank Ltd. and the Government of Singapore Investment Corp. to fund Japan's largest real estate deal, three people familiar with the transaction said.

Morgan Stanley will obtain senior loans from Citigroup and Tokyo-based Shinsei, and junior credit from GIC, the investment unit of the Singapore government, to fund its 281.3 billion yen purchase of All Nippon Airways Co.'s 13 Japanese hotels, said the people, who declined to be identified because the lending hasn't been announced.

Japan's commercial land prices rose for the first time in 16 years in the 12 months ended June 30, as international and domestic investors competed to buy properties. Citigroup and Shinsei are looking for buyers of the senior loans worth 180 billion yen after the collapse of the U.S. subprime mortgage market prompted more than $50 billion of writedowns at the world's biggest banks and pushed up borrowing costs.

``Japan's real-estate market is still hot but it is true banks are cautious about making exposure after seeing the absolute turmoil in the U.S. and Europe,'' said Koyo Ozeki, head of Asia-Pacific credit research at Pimco Japan Ltd. ``Debt investors have become more demanding in pricing as well.''
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